The objective of the proposed research is to examine the relationship between Medicare reimbursement policy and the quality of care provided to hospital patients. The best predictor of a high quality outcome is the provision of clinical care appropriate to the identified needs of the patient. Quality is maximized when proper diagnostic and therapeutic procedures are provided given the signs and symptoms the patient presents with. This proposal would perform a secondary data analysis upon research underway at the RAND Corporation directed at the definition and measurement of hospital based quality care. The basic design strategy is a before and after study of patient care straddling the implementation of prospective payment by Medicare in late 1983. In addition to the clinical measures of process and outcome provided by the RAND research, structural variables describing the participating hospitals will be added to a regression model attempting to predict quality. These structural variables include local market and hospital characteristics, as well as reimbursement by the Medicare program. This research is designed to identify the variance in quality which is explained by structural characteristics of the participating hospitals. The specific aims are to: - Identify market and hospital organizational factors which contribute to quality hospital care. - Identify and measure area differences in quality. - Establish the effect of payment level on quality. - Assess the impact of prospective payment on quality.